Your credit card typically uses only tracks one and two. Track three is a read/write track (that includes an encrypted PIN, country code, currency units, amount authorized), but its usage is not standardized among banks.

The information on track one is contained in two formats -- A, which is reserved for proprietary use of the card issuer, and B, which includes the following:

There are three basic methods for determining that your credit card will pay for what you're charging:

Merchants with few transactions each month do voice authentication, using a touch tone phone.

Electronic data capture (EDC) magstripe card swipe terminals are becoming more common -- so is having you swipe your own card at the checkout.

Virtual terminal on the Internet

This is how it works: After you or the cashier swipes your credit card through a reader, the EDC software at the point of sale (POS) terminal dials a stored telephone number via a modem to call an acquirer. An acquirer is an organization that collects credit authentication requests from merchants and provides a payment guarantee to the merchant.

When the acquirer company gets the credit card authentication request, it checks the transaction for validity and the record on the magstripe for:

Merchant ID

Valid card number

Expiration date

Credit card limit

Card usage

Single dial-up transactions are processed at 1200-2400 bps, while direct Internet attachment uses much higher speeds via this protocol. In this system, the cardholder enters a personal identification number (PIN), using a keypad.

Erased magstripe (The most common causes for erased magstripes are exposure to magnets, like the small ones used to hold notes and pictures on the refrigerator, and a store's electronic article surveillance (EAS) tag demagnetizer.)